“I have a friend who has been driving me insane about how he just thought Yaletown is just the greatest place. He was looking at a teeny condo, so small that I could touch the walls with outstretched arms. It was $510K. He borrowed money from Dad… and then he realized he didn’t have the money for closing costs. He put it on his line of credit! Now he tells me, three weeks in, that he is concerned the $356 a month condo fees are too high. This guy must make high dough, but he is in way over his head.
He was kind of nervous at lunch today about the above. Then he dropped the bomb on me. He still has student loans of $61K and his credit card debt on five cards is nearly $70K.
After I gathered my thoughts, I was still speechless.
This gent seems to think everything will be fine.
I paid for lunch, of course.
How many poor schnooks are in this kind of jackpot?
He has a leased Lexus, and all the toys and great clothes and goes to Maui on the credit card every year.”
- ‘Bill Gable’ at greaterfool.ca 15 Sep 2011 12:59am
[hat-tip to 'Bailin' in BC', who notified us by e-mail]
How many in same boat?
When pullback comes, condos crash.
Move-upper-wannabes cease-up.
Whole market crashes.
- v.
Assuming this is true, that’s pretty impressive in terms of easy this guy can borrow and spend. Though I thought only HAM drives luxury vehicles and no one leases them?
Actually even without a crash this guy is more or less toast unless his condo rises 10% in value each and every year. Otherwise that student loan debt and the 20% interest on his $70K credit card debt will do him in pretty fast. He’s probably paying $15K in interest on the credit card debt alone annually! He better be making 6 figures. Why doesn’t he consolidate his CC debt into a line of credit or do some balance transfer juggling act to get his interest rate down?
Why wouldn’t it be true? Judging by other stories I heard, this one seems plausible. It’s not uncommon.
Well, I watch ‘Til Debt Do Us Part and Princess TV series on Slice where Gail goes to these people who are spending out of control and set them straight. However I always think these are the exceptions, outliers.
This guy has student loan, $70K in credit card debts likely at 20%+ interest rate (compounded monthly so actual rate much higher), a leased luxury vehicle, and now he’s borrowing his dad money for a down payment, closing cost on LOC and can’t pay the strata fees. This just sounds crazy! Especially if this guy actually make a good salary which I assume would mean he actually graduated from university and have some critical thinking and analytical skills. To be this crazily in debt all for consumption, I just can’t fathom it would be a regular occurrence for a highly educated person to do that.
“Well, I watch ‘Til Debt Do Us Part and Princess TV series on Slice where Gail goes to these people who are spending out of control and set them straight. However I always think these are the exceptions, outliers.”
They are so not outliers. Imo they are average Joes who just don’t spend in line with what they make, don’t keep track, use credit, didn’t cut back when they lost income, etc. If we didn’t use jars with cash for our expenses every month we’d be so screwed. We used to just sort of buy what we needed with some idea of what we could afford and we never managed to save a penny…oh, okay, well, maybe a nickel, but a quarter saved was rare. Good thing we never managed to get ourselves severely in the hole. Anyway, I just think that those people on that show are the norm. Ever read the comments section on Gail’s blog, every second one is “Can you help me? Can I come on the show?” People totally clueless, “How do you know what to put in the jars?”
It’s a Keynesian policy goal for society to transfer money to people like this precisely because they will spend it.
rp1, is it also Keynesian to deregulate the issuing of credit while simultaneously changing policy on bankruptcy to effectively trap the middle class into debt slavery? Because that would explain a lot.
Why pay his lunch?
Just because you are financially prudent and he is not, his poor financial planning makes you feel guilty. You think he cares when when is in maui or driving his sports car and you are the “poor, dirty renter.”
You are an enabler – period.
I once had an ex gf who would expect me to pay for everything because she was saving for a down payment on house. I used to tell her, well I am saving for my retirement fund, so what?
Its funny – the people with mortgages always think that renters should pay because “they have a mortgage.” But they look down on renters as being poor, and not having the financial means to buy a house.
Only in Vancouver…
Agreed. I don’t see one good reason to feel sorry for the guy.
Should have made him pay since he doesn’t give a crap about throwing money around like an idiot.
I would have asked him to put lunch on his credit card. Whats a few more dollars on a 70k balance?
Underwater owner is underwater.
This one’s for the annals but there have been guys like this forever. Plus ça change.
Maybe when it comes dates and meals, the renter is not so much poor and can’t afford a house, but rather the free spending financially irresponsible big spender who should be picking up the tabs. After all they don’t have a mortgage to pay and don’t need to be responsible like an owner!
We slummed it for years with a 27″ CRT tv while a friend went through all the technological iterations from the wide screen CRTs through LCDs of varying sizes to plasmas. Many other contrasts exist between our fiscal prudence and their profligacy. It pisses me off no end when they are over two years late in repaying a loan we made to them of a few hundred to help cover the credit card payments. Their spending habits continue yet somehow repaying us doesn’t make it onto the list of priorities. I hate to be made to feel like a tightwad when asking for repayment, so I don’t. And they continue to be paycheck to paycheck, while our savings grow, so it would seem heartless. But the principle of the thing is, that one person’s prudence should not have to be abused to subsidise another’s uncontrolled consumption.
27″? You wild man. We still slum it with a 22″ CRT. I like that when we are gone I have absolutely no worries about anyone breaking in to steal it. If anyone broke in, I imagine them leaving us an LCD TV out of sympathy.
LOL!
It IS funny. At my workplace some genius argued he needed a raise because he had such a big mortgage. No argument over merit, potential for competitive offers, or anything like that. He said he needed a raise purely because his mortgage was too big. And this got approved, in fact raises need 4 different levels of approval at the my workplace, so it was approved at 4 levels. Sheesh, maybe time to buy a westside property!
They probably gave him the raise so he Paretos up to the higher bin on the “who do we cut” spreadsheet.
Supply side economics just spat coffee all over its keyboard.
Thank you. Ain’t heard Pareto since… well, like, a REAL long time. Can’t say where. It would be misinterpreted as ‘ToffeeNosed’ or some such.
Sigh. Nem was a just fortunate interloper/social chameleon. But then, that’s what ‘Liz’ trained/paid him to become.
As for ‘supply side’… remember “Laffer”?
Tosh.
We need to address aggregate demand. BigTime. The OldSchool, KeynesianWay. (RealMen’s Keynesianism, not that WishWashy post-post-modernist stuff).
Something bold.
(and righteous)
I neglected to add, buying the wastrel’s lunch is merely the price of admission to a good story… and good stories are “equipment for living” (i.e. – helping the afflicted make it from one day to the next – hopefully, with a smile).
Yes. It’s BBQ time. And… that’s it.
“We need to address aggregate demand. BigTime. The OldSchool, KeynesianWay. (RealMen’s Keynesianism, not that WishWashy post-post-modernist stuff).”
Agreed and I love the “RealMen’s Keynesianism” term.
Roubini says US is on the cusp of a double-dip. Phily Fed Index looks bad. Demand is dead due to over-leveraged debtors.
Hey I should try that.. I don’t have a mortage but my mercedes needs some new rims!
At least it’s paid for
Or Vulture Boy, just tell them the same thing if you want a raise regardless of whether you rent or own.
Or tell them that you have too many kids to feed and need the raise.
If you have to get through 4 levels of approval, your company is obviously big enough that the guys doing the approval won’t know the difference.
By the way, the people pushing for raises at my company and the ones most unhappy with the the annual raises are the heavily indebted house “owners” The rest of us appreciate getting a raise in these difficult times.
I’ve always been a bit confused by parents’ willingness to lend big wads to their kids but then a family member passed on earlier than expected and the full force of tax implications comes into play. When you see parents buying this and that for their kids, chances are they’re trying to avoid tax down the road.
this paper tiger is the exception, not the rule.
I’ve borrowed so much money that I’m rich!
I literally laughed out loud. That rarely happens with my dead-pan expression whist being bathed in the computer glow. Thank you.
http://www.cbc.ca/news/canada/british-columbia/story/2011/09/15/bc-vancouver-real-estate-bubble.html
There’s no bubble, prices will stay high as long as interest rates stay low.
“As long as interest rates stay at historic lows forever, and never revert to the mean, we’ll be just fine!”
This guy is an economist? Then he should know that you don’t need everyone to start selling to pop a bubble, you just need the marginal buyers to decide the prices have gotten too rich and they’ll “wait and see” for awhile.
thanks for the link:
“Market speculation —commonly known as flipping — currently accounts for only about two or three per cent of the market.
Yu says that is a normal level, which shows most people are living in the homes they buy.
“Our research shows few signs that speculators are overly active in the Vancouver market, which means we are unlikely to see a speculation-induced bust,” he said.
“Even if the economy slows and employment slows, we expect to see individuals hold on to their homes, rather than sell them in a weaker market,” he said”
‘Speculation’ is a lot, lot more than buying with the intention to sell within 6 months (which is probably okay to refer to as ‘flipping’). We’ve shared various thoughts on this before, but will try to bring them all together in a review post sometime in the next couple of weeks.
Aaahhhh… Living the dream in BC…
I wish I could say this is the exception, but I’m more and more convinced this is the “keeping up with the Jones’ norm”… I hear stories like this ALL the time. The spendthrift keep getting subsidized by their thrifty friends and family.
I don’t hear stories like this ever.
I guess one has to wonder if stories like this are the norm, or the exception. If they’re the norm (and by “norm” I mean the norm outside your immediate circle of friends), then we’re in trouble. If its the exception, there is no worry, its just another idiot that doesn’t know how to manage their money.
Who is it, Major Kong? Seriously, if true, props to that guy for getting so much.